Who Claims the Children on the Tax Return in a Divorce?

In the case of Iv vs. Hang, 83 Mass. App. Ct. 598 (2013), two divorced parents clashed over who could claim dependency tax exemptions for their two children. A Massachusetts Probate Court awarded the exemptions to the father, who was also required to pay child support to the custodial mother. Wanting to claim the exemptions for herself, the mother appealed. She claimed that the current Federal Tax Code and Treasury regulations preempted state courts from making any allocation of dependency exemptions.

Under 1984 state and federal law, state court judges had power to allocate dependency exemptions. Bailey v. Bailey, 27 Mass. App. Ct. 502, 504 (1989). However, the mother argued that through subsequent changes to tax laws, state courts lost the power to award exemptions to non-custodial parents. The 2008 federal tax guidelines added a requirement that a written declaration of release must be on a particular form executed by the custodial parent (Form 8332 or a successor form)—not via a court order or a separation agreement. See 26 C.F.R. § 1.152- 4(e)(1)(ii). The mother argued that the custodial parent is thereby “entitled to the dependency exemption unless that custodial parent has agreed to release the exemption.”

The court disagreed. It held that the specification of a particular tax form did not preclude states from assigning assets, liabilities—or exemptions—during divorce proceedings. The court remanded the case to the Probate Court with a suggestion that the judge order the wife to execute a Form 8332 release of the dependency exemptions.

Divorce can lead to complicated tax situations. If you have questions or concerns about how your family might be affected, contact the attorneys at Hutchins Law, P.C. today.

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